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Tenby's new Cottage Hospital development could be up and running in just over 12 months.
Building work at the Gas Lane site, near the health centre, is expected to start within a few weeks and be completed by the end of this year.
It will be fully commissioned by early 2006.
The new hospital will provide a minor injuries unit, x-ray, outpatient and day care facilities, and a centre for the provision of home-based health and social care.
The Local Health Board was told on Wednesday that the board was going out to tender for beds for the new development.
Ten inpatient beds will be supplied by the private sector, and director of innovation, Sarah Williams, said there had been interest from a number of parties and it was hoped it would come to a satisfactory conclusion.
A pre-contract meeting for the building works was to be held this week and anticipated completion date is December 2005.
"That will be absolutely marvellous and sterling work will have been done," she said. Project manager Jenny Bowen said: "Once we vacate the present Tenby Cottage Hospital building, which we lease, it will go back to the owners, Pembrokeshire County Council."
A council spokesman said: "The council has as yet not decided what to do with the building once it is empty."
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